Question

Jessica Tolmy, Costen’s president, decided to devote more resources to the improvement of product quality after learning that her company had been ranked fourth in product quality in a 2010 survey of cell phone users. Costen’s quality-improvement program has now been in operation for two years, and the cost report shown below has recently been issued.

REQUIRED
1. For each period, calculate the ratio of each COQ category to revenues and to total quality costs.
2. Based on the results of requirement 1, would you conclude that Costen’s quality program has been successful? Prepare a short report to present your case.
3. Based on the 2013 survey, Jessica Tolmy believed that Costen had to improve product quality. In making her case to Costen management, how might Tolmy have estimated the opportunity cost of not implementing the quality-improvement program?